Experts say that it is not impossible for the US dollar to collude with the digital currency. They believe that the Fed will likely use Facebook's digital currency Libra as a platform to continue the US dollar hegemony.
Facebook's Libra is causing a ripple effect around the world. Cai Weide, director of the block network of the National Big Data (Guizhou) Comprehensive Experimental Zone, believes that it is not the wolf, but the tiger, and the new currency competition has begun!
Libra challenges sovereign currency?
Trump:Facebook wants to become a bank must apply for a license
On July 11, Fed Chairman Powell said in a US Senate hearing that no bitcoin was used as a payment method, but as a value reserve, Bitcoin is replacing gold in the global economy. Lawmakers expressed their concerns about Bitcoin and other cryptocurrencies, including the possible challenge of bitcoin replacing the dollar as the world's reserve currency.
When attending the hearing, Powell also said that although the Libra project sponsors believe it is beneficial to the public, such as improving consumer financing channels, the project has raised serious concerns in the areas of privacy, money laundering, consumer protection and financial stability. A thorough and open solution is achieved before proceeding.
Powell also said that the current regulatory rules cannot be applied to cryptocurrencies, and this new thing should be treated with a "patient and careful" regulatory attitude. “Facebook has billions of users, so I think for the first time the possibility of digital currency being widely adopted,” he said.
On July 12th, Trump published three tweets, bluntly speaking about Libra and "virtual currency."
-- I am not a fan of bitcoin and other cryptocurrencies, they are not money, and the value is highly unstable and based on thin air. Unregulated cryptographic assets can contribute to illegal activities, including drug trafficking and other illegal activities.
-- Facebook's Libra "virtual currency" will not have any status or reliability. If Facebook and other companies want to become a bank, they must apply for a banking license and be subject to all banking regulations like other banks, across the country.
-- In the US, we only have one real currency, and it is stronger, trustworthy and more reliable than ever. It is by far the most dominant currency in the world and it will remain in this state. It is called the dollar!
On June 18 this year, the cryptocurrency Libra white paper was officially released and went online to test the network. Libra is considered to be a super-sovereign currency, and some even regard it as the prototype of the "world central bank."
Libra will be linked to a basket of convertible currencies, so it can be used as a stable online currency. Its payment function will be endorsed by Visa and MasterCard, which means it can be used for a range of online services.
As a cryptocurrency that anchors legal currency and is stable in value, Libra does not declare war on legal currency. On the contrary, Libra will help the use and popularity of legal currency. Cai Weide believes that "Libra will support the US dollar as a supplement to the US dollar."
At the same time, it can be seen from Trump's Twitter that Facebook's application for a banking license is also an option.
Earlier, American companies such as IBM and JP Morgan Chase have launched similar stable coins. According to Cai Weide's statistics, so far, American companies and major global banks have joined forces to launch five kinds of stable coins. Cai Weide calls them five tigers:
Zhou Xiaochuan:A stronger global currency may emerge,
Is a challenge to the renminbi
Zhou Xiaochuan, president of the China Finance Association and former president of the People's Bank of China, said at the "China Foreign Exchange Management Reform and Development" seminar held on July 9 that the success of Libra itself has not yet been determined, and there may be more internationalization in the future. The strong currency of globalization has led to the exchange of major currencies with it. "This currency may not be Libra, but we believe that from the trend of recent years, many institutions are trying to establish such a more global currency, and then there will be problems with strong coins eroding weak currency."
In Zhou Xiaochuan's view, this is a challenge for the RMB and foreign exchange management.
At the 2019 World Economic Forum's New Champions Annual Meeting on July 1st, experts also debated Libra.
Zhang Wei, the founder of Luhan Capital, believes that Libra's corresponding target should be Alipay, just a new type of payment. "Although there is a voice saying that it is a cryptocurrency, if you analyze its white paper, you will find that it has asset collateral and guarantee. The current business scenario is cross-border payment, and it also includes payment methods that are not available in the existing banking system."
Zhu Min, dean of the National Finance Research Institute of Tsinghua University, holds different views on this. In his view, Libra is not a payment system, but is similar to the concept of electronic money and payment. “Libra is a currency, and it will be a big shock to the existing monetary system, financial system and future reserve system. It should not be taken lightly. ""
The famous economist Lang Xianping issued a microblog that Libra sounded like the Special Drawing Rights (SDR) of the International Monetary Fund.
Cai Weide's point of view is very straightforward. He wrote on WeChat slogan that Libra will be an aid to the US dollar. These stable coins cannot and will not replace the French currency, but instead become a tool for legal currency and help promote the legal currency. Facebook Stabilization Coins must support the US dollar and is an aid to the US dollar. "The logic of the hegemony of the dollar is as follows: the dollar is the boss, the younger brother with the digital dollar, the digital dollar is the way for the dollar, who wants to find the dollar trouble, first pass the digital dollar and say it!"
However, Zhou Luohua, deputy dean of the Chongyang Financial Research Institute of Renmin University of China, said: Don't be scared by it!
Zhou Luohua said that no matter what money is used as currency, money is a set of order, a rule, a morality, and an incentive and restraint mechanism. The real change in the history of money is slow and lacks innovative examples, because it is too difficult to establish a new set of morals. In most cases, people do not need a new morality to change their existing lives.
Please tell me first, what new ethics does Bitcoin and Libra bring? Maybe they have some new conveniences, but that is not new morality. Because for Bitcoin, it solves the problem of realizing transactions between two people who are extremely lacking in trust mechanism, but at the same time its 'consensus mechanism' is also a bigger loophole, that is, if more than 50% of the bitcoin system If they collude, they can plunder other innocent people, and they can allow themselves to issue new bitcoins to dilute the wealth of others.
Chinese officials have already taken the initiative to research and issue digital currency
The People's Bank of China is one of the first central banks to conduct research and experimentation on digital currencies.
On July 8, Wang Xin, director of the Central Bank Research Bureau, revealed that the State Council has officially approved the research and development of the central bank's digital currency. At present, the central bank is organizing market institutions to engage in corresponding work.
Unlike the digital currency that most people understand, the digital currency issued by the central bank is actually a "digital legal currency." Wang Xin said that the central bank's digital currency is defined as M0 in China, which is a certain degree of cash replacement.
In February of this year, at the National Monetary and Gold Work Conference in 2019, Fan Yifei, deputy governor of the central bank, proposed to steadily push forward the research and development of central bank digital currency and strengthen the monitoring and disposal of virtual currency.
In fact, China’s central bank’s research and development of digital currency has been advancing for several years.
In 2014, under the advocacy of Zhou Xiaochuan, the then central bank governor, the central bank set up a special research group for issuing digital currency and began research and development on digital currency and central bank digital currency.
In 2015, the Financial Research Institute established the Internet Finance Research Center.
In May 2017, the Central Bank Digital Money Research Institute was officially listed, and conducted in-depth research on digital currency issuance and business operation framework, key technologies of digital currency, distribution and circulation environment, and legal issues.
In September 2018, the Institute established a trade finance blockchain platform.
At present, with the approval of the State Council, the central bank is organizing market institutions to jointly conduct research and development of DC/EP (payment instruments with digital currency characteristics).
Xiao Lei, a digital currency analyst, believes that if the Chinese central bank wants to push the digital currency, it needs a stronger endorsement of trust, either our own economic military strength or a huge amount of gold reserves. Strategically, to establish a digital currency suitable for internationalization, digital currency with Chinese characteristics needs to have at least three characteristics: the first is to have international currency attributes, similar to the current offshore market of the RMB, etc., you can choose directly Overseas distribution; the second is to have enough application scenarios, at least with the help of Chinese Internet giants, or other financial business networks; the third is to have real asset endorsements, such as gold.
According to central bank data, China has continuously increased its holdings of gold in the past seven months, with an average of more than 10 tons of gold per month. At present, the central bank's gold reserves have reached 61.94 million ounces.
Zhou Xiaochuan suggested in his public speech on July 9 that he could also learn from the Hong Kong dollar issuance system and require 100% guarantee for the issuer of digital currency.
Because of the lack of a strong guarantee institution to maintain the stability of its price, digital currency such as Bitcoin has not yet appeared as a value scale, and cannot reflect the functions of payment means. However, when the national entity develops digital currency, the situation will be different.
Europe bypasses the United States to build a payment system,
The new currency war has begun?
Recently, the EU said that it will establish an SPV, which will enable European companies to bypass the dollar-dominated Global Banking Financial Telecommunications Association (SWIFT) payment system and legally conduct business with Iran. The SPV will also be open to countries such as China and Russia. Some commentators believe that this not only threatens the reserve status of the US dollar, but also the US-led financial system will usher in a real challenge.
SWIFT is an inter-bank international cooperation organization. Currently, tens of thousands of financial institutions and corporate users in more than 200 countries and regions use the SWIFT system for financial messaging.
Although SWIFT claims to be neutral, it has been criticized for using the system to impose sanctions on many countries and businesses.
The SPV channel will enable European companies to bypass the United States and continue to trade with Iran. Federal Minister of Foreign Affairs Federica Mogherini said that the plan means that EU member states will establish a legal entity to legally trade with Iran, so that European companies can continue to trade with Iran.
The dollar can gradually be accepted as a world currency by countries, and it is a long-term evolution process. But it is an indisputable fact that the Fed is in control of the US dollar printing machine. The amount of money printed by the Federal Reserve has always affected the rise and fall of the economies of the world.
Digital currency analyst Xiao Lei said that to defeat gold as the world's universal currency, it is not another metal better than gold, but paper money. The dollar that beats the dollar may not be the next banknote, but the digital currency.
Is the emergence of Bitcoin and Libra threatening the dollar hegemony and the SWIFT payment settlement system, or will it help the dollar continue to maintain hegemony?
When Libra and others began to circulate, just as the Internet brought the world's information without dead ends. When will Europe and other countries take the challenge of dollar hegemony?
Cai Weide believes that in the past, currency competition was the benefit of countries through the use of legal currency. The usual practice was to obtain benefits by devaluing the legal currency to stimulate exports. When countries begin to competitively depreciate their domestic currency, global currency wars and exchange rate wars will break out. This is old-style currency competition. The new currency competition can also use stable currency to enter other countries' markets, and can control trading information in a timely manner.
There are also views that the establishment of the US dollar hegemony in history is, on the surface, linked to the dollar and gold, and is the Bretton Woods system. In fact, it is based on the strong domestic production capacity of the United States. The key reason why countries are willing to link their currencies to the US dollar is that the United States is strong, the US dollar is stable, and there is a production capacity that cannot be compared with other countries.
Zhou Luohua, deputy dean of the Chongyang Finance Research Institute of Renmin University of China, believes that as long as we defend our ethical system and manage our financial system, we don't have to worry about any new currency to subvert our financial system. In a word, as long as we take care of the interests of people who use the renminbi, we don't have to worry about using other currencies.
Who will become the real winner in the new currency competition? We will wait and see!